Malaysia has imposed strict new regulations requiring export licenses and advance notification for high-performance US-made AI chips passing through the country, responding to concerns about their diversion to China. This move follows US pressure and reports of Chinese companies exploiting regulatory gaps to access restricted technology. The regulations affect Malaysia's growing status as a data center hub, which has attracted over $16.9 billion in tech infrastructure investments. Companies must now comply with the Strategic Trade Permit system, report suspected illegal activities, and face consequences for violations. These changes will impact global AI supply chains and technology investment patterns across Southeast Asia.